Wells Fargo & Company (WFC) received a bullish upgrade from Bank of America Securities analyst Ebrahim H. Poonawala, who raised his price target from $75 to $84 while maintaining a Buy rating. This optimistic outlook stems from a recent meeting with Wells Fargo’s CEO Charlie Scharf and CFO Mike Santomassimo, which solidified the analyst’s belief that the bank is on track to deliver impressive returns.
Poonawala highlighted the bank’s renewed focus on franchise efficiency, emphasizing their commitment to cost control, expanding client wallet share, and increasing market presence. This strategic shift comes after years of prioritizing regulatory issues. The management team expressed confidence in the potential of each of their four business segments to achieve top-tier returns, aiming for a ROTCE (Return on Average Tangible Common Equity) between 16% and 19%.
Adding to the positive outlook, Poonawala noted that management emphasized substantial growth opportunities across all aspects of the franchise, not just in capital markets, wealth management, and cards. Despite the stock’s strong performance this quarter, Poonawala believes the upcoming removal of the 2018 asset cap, expected in early 2025, will serve as a major catalyst, attracting a new wave of investors and potentially leading to a re-evaluation of the stock’s valuation.
This optimistic outlook is further supported by Poonawala’s revised FY25/26 EPS estimates, which were increased by 4% to $5.64 and $7, respectively. These estimates translate to a projected ROTCE exceeding 15% in 2025 and 16%+ by 2026. The analyst anticipates even greater upside potential, noting that current consensus estimates overestimate credit costs while underestimating fee growth.
For investors interested in gaining exposure to Wells Fargo, the analyst suggests considering the First Trust Nasdaq Bank ETF (FTXO) and the Invesco KBW Bank ETF (KBWB). WFC shares closed Monday at $73.04, reflecting a 4.28% increase.
